We have just discovered one of our customers who owns a local variety store is cashing checks above $1,000 a day per person, so of course they are now an MSB. They are not registered and we want to remedy the situation. The question is, if the customer decides they don't want to register as an MSB and chooses to no longer cash any check above $1,000, are they still considered an unregistered MSB? I say they are, but need some regulatory guidance indicating that. I have read the FFIEC section on MSBs, but this specific question is not addressed there (except for the last paragraph on p.311 which does not directly or fully answer my question).

The decision to register is up to the business. I would file a SAR, since they were operating in violation of the registration requirements at the time the transactions were made. When you do your follow-up in 90 days, review the transactions to see if they were again in violation. If so, file a SAR and if they continue in violation and don't register, then it's your decision as to whether or not you want to close the account.

If in the 90 days they have no 'qualifying' transactions, then no continuting SAR is necessary and the matter is closed. That is, until and unless you find that they are again acting as an MSB.

I'm facing a similar situation.
Have any of you faced an "unregistered MSB" that has significant loan balances with your financial institution? I have one with loan balances near $1 million - so there is apprehension on the part of some about shutting down the account.

Just my 2 cents....

Is there anything in your loan documents that would allow you to call the loan based on the customer's failure to register? MSBs are required to be registered, so maybe your legal counsel can take a look at it for you.

I can understand the apprehension, but things may be worse if you allow the unregisterd MSB to continue operating through your institution because you didn't want deal with a potential loan issue.

There is no regulatory requirement to shut down the account, just to file the SARs. If the account relationship supports the additional costs - don't worry about it.

Thank you both for your input.

Make sure they understand that the IRS is the MSB "auditor". I would suggest to them that they probably don't want to upset the IRS.